Redefine Income Fund today announced an increase in distribution from the first quarter of 6.2% to 13.8 cents per linked unit for its second quarter ended 28 February 2009, despite adverse economic conditions locally and globally.
Together with the first quarter distribution of 13 cents per linked unit, the total distributions for the six-month period amounts to 26.8 cents per linked unit, representing a slight decrease of 1% on the distributions for the comparable period.
Redefine CEO Brian Azizollahoff explains that growth in earnings in the first six months of the year has been adversely affected mainly by a slowdown in sales of sectional title trading stock, together with delays in transfers of sold units to purchasers as profit is only recognised on transfer. On a positive note, there has been increased interest from purchasers in Redefine’s sectional title office scheme, Buchanan/Newmarket.
In regards to the Redefine/ApexHi/Madison merger, Redefine issued revised listing particulars which referred to a forecast distribution for the year to 31 August 2009 of 62.6 cents without taking into account the effects of the merger. This forecast was prepared using actual results for the four months to 31 December 2008, and forecast results for the remainder of the year.
In terms of future performance and outlook, since the release of that forecast there has been a greater than expected deterioration in the overall economy and consequently the property market. The forecast could be impacted by lower distributions from Redefine’s portfolio of listed securities, its joint ventures and slower sales in property trading, exacerbated by delays in transfer. However it is expected that income from the core property portfolio will be in line with the forecast.
“It is difficult to predict the level of property trading sales which will be achieved as these are, by their very nature, lumpy. However, it is expected that income from the core property portfolio will be in line with the forecast,” says Azizollahoff.
At the close of the quarter, Redefine’s assets totaled R10 billion with a market capitalisation of R6 billion and Net Asset Value (NAV) of R6.92 per linked unit. Gearing is at a conservative 36.5%.
Managing its exposure to the cost of debt, Redefine decreased its borrowings by R63 million from August 2008. The company’s total debt of R3.6 billion represents a loan to value ratio of 36.5%, slightly higher that the 35.2% reported at the end of August 2008 as a result of the drop in value of the listed portfolio. The current average all-inclusive interest rate of Redefine’s borrowings has decreased to 9.9% from 10.5% in August 2008. The interest rate is fixed on 88.6% of its borrowings for an average period of five years.
At the end of February Redefine’s total property portfolio of R5.7 billion was comprised of 97 properties and properties for development and trading and constituted 58.8% of Redefine’s total non-current assets, slightly higher than the 56.8% in August 2008.
During the period under review, 29,632m2 of vacant space was leased and leases in respect of 38,408m2 were renewed. The unfavourable economic conditions are reflected in Redefine’s vacancy rates which increased from 4.8% of GLA at the end August 2008 to 5.9% at the close of February 2009. This has been reduced to 5.1% as of the end of April 2009. By GLA, 53.7% of Redefine’s leases expire in 2012 and beyond.
In April 2009, the proposed acquisition by Redefine of Madison Property Fund Limited and ApexHi Properties Limited was supported by shareholders of all three companies. This transaction will create one of the largest listed property companies in South Africa, with an estimated market capitalisation of more than R18 billion.
In addition to the sanctioning by the High Court and the registration by CIPRO of such Court Orders, the merger is conditional upon the approval of the Competition Authorities and further announcements in this regard will be released on SENS and published in the press in due course.
“We are pleased with the outcome of this transaction to date. The new Redefine is set to benefit from increased earnings, a sound management base drawn from the three companies, increased international investor interest, better access to funding, cost savings and enhanced competitiveness,” notes Azizollahoff.
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